Whistleblowing and Problems of Enforcement

The post yesterday by Professor Moberly concluded that administrative failures in providing whistleblowing protection could ultimately discourage the very whistleblowing that SOX was designed to protect and promote. Unfortunately, Congress charged OSHA under the Department of Labor with the responsibility to investigate whistleblowing complaints. OSHA investigators are specifically trained on work safety complaint issues, but SOX whistleblowing provisions usually involve complex accounting issues. Consequently, until either OSHA hires CPAs to conduct SOX whistleblowing complaints or Congress charges another agency with the appropriate personnel (for example, the General Accounting Office), potential whistleblowers will view the SOX protections as illusory given OSHA’s dismal track record.

This dismal track record is made all the more surprising given the “employee friendly burden of proof” noted by Professor Moberly.  The Department of Labor will dismiss a complaint unless the employee satisfies the relatively easy burden of showing that any protected whistleblowing was a “contributing factor in the unfavorable personnel action.” On the other hand, to avoid liability the employer then must show by “clear and convincing evidence” that the employer would have taken the same unfavorable personnel action in the absence of the whistle blowing. This “clear and convincing” standard is a much higher burden than the “preponderance of evidence” standard required in normal civil litigation. However, according to the author’s study described in the post, employers have been successful in the vast number of whistleblowing cases in satisfying the “clear and convincing” burden of proof.

Professor Moberly also points to the lack of any public investigation or prosecution under the whistleblowing criminal provision. Section 1107 provides a ten year penalty for retaliating against an employee for whistleblowing to law enforcement authorities. And this provision appears to have broad application since all employers, not just publicly traded companies, are subject to this criminal provision. However, most employer retaliation involves the situation where the employee is following the employer’s code of ethics to whistleblow internally within the company. In fact, the failure to whistleblow as required by the employer’s code of ethics usually constitutes grounds for termination. However, it is still remarkable that no criminal case has surfaced where the employer retaliates against an employee for testifying truthfully to law enforcement officers.